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3 developer stocks to own as housing construction rises

The rise in housing construction seems to be carrying on. Increasing building approvals indicate more construction in the near future. New housing finance figures from the Australian Bureau of Statistics (ABS) show growth in loans for new home construction.

The statistics for January show a trend for finance commitments for owner-occupier dwelling construction up 1.8%. The upward trend is in its fourteenth straight month.

As property buyers contend with rising prices of established homes – especially investors with investment yields in mind – constructing new homes is appealing. This is a welcome move for home builders. Here are some updates on how three major housing companies are progressing.

Stockland Corporation Ltd (ASX: SGP), a residential and commercial property developer, has evidenced this housing growth in its residential and retirement living operating profits, up 39% and 42% respectively in the six months ending 31 December.

Its largest business segment, retail property development, was also up a respectable 9% in underlying profit for the period. As a large developer, it can build housing communities as well as the retail space near those communities.

Lend Lease Group (ASX: LLC) also develops residential, retirement living, retail and commercial properties. It has $1.52 billion in pre-sales revenue across its residential and retirement living segments. This revenue will be realised over the next few years as construction is completed.

Residential community settlements are up 43%, and pre-sales gained 28% in the first half of FY2014 on the pcp.

As an international company, it is seeing promising market trends in its Asian retail construction, UK housing development and US general construction.

Mirvac Group (ASX: MGR) mirrored the advance of Lend Lease by achieving about $1.5 billion in pre-sales contracts. Similarly, the revenue from the sales will be realised within the near future. In addition, the company reported that gross margins are on track within target range of 18%-20% in FY2014, indicating that house prices are improving.

In the first half of FY2014, 1,032 lots were settled, and acquisitions of land for more than 1,100 new lots were made across NSW, VIC and WA.

Foolish takeaway

With economic concerns clouding a clear view of how the housing market will go forward, investors should concentrate on the real data coming through to position themselves for future growth. When an economy is in a state of change, it can flash green signals and red signals until the next trend becomes self-evident and strong.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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